AHDB European Market Survey

AHDB European Market Survey - 11 May 2012

Total fresh and frozen imports of pork into Japan in the first quarter of 2012 were up six per cent compared with the previous year to 198,000 tonnes.

Japanese pork imports up

The rise was due to an increase in both fresh/chilled and frozen shipments. The US remained the dominant supplier, responsible for 42 per cent of all pork imports.

Total fresh pork imports were up six per cent on the same quarter of 2011, largely the result of increases in shipments from the US and Canada, up five per cent and 12 per cent respectively. The average unit price of fresh imports was up four per cent in US dollar terms but unchanged in yen as the price is controlled by the Japanese government.

Frozen imports of pork were up five per cent on the year largely due to increased shipments from the US and Mexico, up 11 per cent and 37 per cent respectively. Mexico signed an agreement with Japan in February 2011 to extend its low-tariff pork quota by 10,000 tonnes per annum. The average unit price for frozen pork imports was unchanged in yen terms but up four per cent on the year in US dollars. Frozen imports from the EU were up two per cent, with increased shipments from Denmark, Spain, Poland and Austria.

Japanese pork production was up four per cent in the first two months of 2012 compared with the previous year. The USDA forecast in April 2012 that Japanese pork production will be one per cent higher in 2012 overall. Despite the difficulties caused by the tsunami in March last year, domestic pork production recovered at a faster than anticipated rate with production even exceeding 2010 levels in the last four months of 2011. As of the end of February 2012, total pork stocks were up four per cent on the same date last year, resulting from higher imported stocks.

Consumption of pork in January to February 2012 was three per cent higher than the same months of 2011. However, the USDA forecasts that pork consumption will fall by one per cent in 2012 overall after increasing by a similar amount in 2011. This comes as a recovery in beef consumption and an increase in the availability of lower priced, domestic, chilled pork cuts may result in reduced pork imports and therefore lower consumption. This also assumes that demand for frozen imported cuts (for processing) will remain stable.

Update on CAP reform debates

Over the last few weeks there have been a series of meetings in Brussels on the reform of direct payments, referred to as Pillar 1, of the Common Agricultural Policy (CAP). As the proposals currently stand, no area in the debate has reached common consensus, with Member States still widely split on most items.

There has been a lot of interest in the Commission’s definition of an active farmer. According to the proposals, recipients must get at least five per cent of their income from agricultural activities, excluding any subsidies. However, it remains unclear as to how this will be calculated and whether it will be determined by revenue or by net returns. Member States have expressed concerns about the administrative difficulties in implementing the Commission’s current definition. According to industry sources, Denmark and the UK are understood to be in favour of supporting the creation of a ‘negative list’ of holdings not eligible for CAP support, such as golf courses and sports facilities.

The proposals indicate that payments for active farmers are to be re-allocated, with a single scheme across the EU, the basic payment scheme. This will put an end to historical payments by 2019, in favour of an entitlements scheme allocated at national or regional level. This will see farmers in the same region receive the same level of payments per eligible hectare. Sources indicate that few Member States favour the proposal as it currently stands. Several, including the UK, have said that the end of historical payments by 2019 is too quick a transition. Other Member States, particularly from Eastern Europe, have argued against moving towards a flat rate.

Current proposals indicate that 30 per cent of direct support will be made conditional on greening. Sources indicate that at present only France and Germany are in favour of the proposals. A number of Member States argue that greening measures should be voluntary, while others argue that 30 per cent is too high. The UK has suggested that the greening component of direct payments runs contrary to the Commission’s aims of simplification and that it should instead be included under the CAP’s Pillar 2, which specifically addresses Rural Development. An alternative greening proposal has been put forward by a group of Member States, referred to as the Stockholm Group. The proposal suggests scrapping the EU’s proposals of 30 per cent of direct payments, instead requiring governments to choose from one of three broader measures.

Another topic in the CAP debate is the introduction of phased-in caps on payments, with reductions on amounts above €150,000 and a limit to payments of €300,000. Capping rates would only be calculated once salaries, taxes and social contributions related to employment are taken into account. This means that farmers with a higher wage bill will not be penalised, while the greening element is excluded. Industry sources have indicated that Ireland, France and Spain support the proposal, although France has called for more discussion on the issue and Spain has suggested that it is too complex. Germany and the UK are against the current proposal, as it penalises large farmers.

With many aspects of the proposals for CAP reform still unclear, the EU Commission has announced that it will be publishing a series of ‘non-papers’ (informal explanatory notes) by the end of June 2011. These will aim to provide more detail on the draft legislative proposals and allow for more informed discussions. Areas where more details have been called for include greening, capping and the definition of an active farmer.